Analysts think Tesla Inc. (TSLA) needs to start readying a replacement quickly for its visionary founder and CEO, Elon Musk.
A Securities and Exchange Commission complaint filed last night against Musk has Tesla stock crashing 12% as of 10:00 a.m. in New York. The complaint threatens to remove the company's popular front-man from power and disallow him from holding an officer position at any public company.
"This begs the question as to what Elon Musk's incremental value is compared to the distraction he provides," Consumer Edge Research senior analyst James Albertine told Real Money. "The world needs Steve Jobs types, visionaries, but at this stage Tesla might benefit from a [Home Depot Inc. (HD) CEO] Frank Blake or [Ford Motor Company (F) CEO] Alan Mullaly-type. A smoother operator."
Albertine said he believes Tesla is "a strong and accelerating fundamental growth story in the automobile business," but that the distraction from Musk is weighing on shares and the board must act to protect shareholder value.
"We credit Musk with incredible vision and the drive to lay a foundation for TSLA's still bright future," Albertine wrote in a note provided alongside his interview. "But we believe there are CEOs or COOs available better suited to managing large, public companies at this stage.
Amid the uncertainty at the moment, Albertine's firm reduced its price target for Tesla to $285 from $300 per share and remained equalweight.
Albertine's take echoes that of RBC Capital Markets senior analyst Joe Spak.
"We have written before and continue to believe that while Elon may have been the right CEO to get Tesla to where they are today, a new leader focused on operating and executing the vision may be preferable from here," the firm wrote in a note explaining the situation to clients last night.
RBC suggested that current chief technology officer JB Straubel might be the man for the job, as he is one of the few mainstays in the revolving door that is Tesla's C-Suite.
Replacing Musk will be a tall order, which is leading some analysts to believe finding a willing successor is going to be a longer process.
Any lengthening of executive uncertainty is likely to weigh on the shares.
"I think Elon is going to have to leave," Brad Meikle, senior analyst at Williams Trading, told Real Money. "If you're on the board, you have to step in. I can't really think of any CEO that has acted this way."
The more difficult problem comes in how to replace him.
"You can try and go with a car guy, but I think most executives would be reticent," Meikle said. "Or you can go for a technology guy, but that ends up outside of their core business in automobiles."
When asked about his thoughts on CTO Straubel as the front runner to replace Musk, Meikle said he believes the company needs to look externally.
"There is talk that they're going to bring in someone like [former Alphabet Inc. (GOOGL) executive chairman] Eric Schmidt, a rock star," Meikle said. "But I think it would be tough to find someone like that who is willing to take on all of the chaos at Tesla."
Given the uncertainty and the "major undertaking" necessary to find a new CEO, Meikle set his target price at a paltry $100.
"This situation puts the company in a precarious position as it risks shifting investor sentiment on the company," Meikle said. "I think the activity around that tweet and since has triggered an investor crisis."
In Meikle's view, there is more pain ahead for the company as a new CEO will need to step in and scale back Musk's "pie in the sky" ideas.